Mandates push 9 percent increase in city health costs

New federal and state mandates are helping to fuel a 9 percent increase in the city’s health insurance costs for its employees and retirees.

With the city in the process of setting premium rates for the fiscal year beginning July 1, municipal health insurance costs are projected to increase by $4.8 million — $1.8 million for the city side of government and $3 million for the public schools — with mandates responsible for most of the increase.

City Manager Michael V. O’Brien said the increased costs will need to be borne by city taxpayers. As a result, funding will have to be diverted from other municipal services to pay for the higher health insurance costs.

In addition, the manager said, another $1.6 million will have to be borne by employees and retirees, who pay 25 percent of their health insurance premium costs while the city pays 75 percent.

“This increase is primarily due to new federal and state medical coverage mandates,” Mr. O’Brien wrote in a report that goes before the City Council Tuesday night.

Acting Assistant City Manager Kathleen G. Johnson said the new mandates include new coverage requirements for many different medical categories as well as coverage for dependents to age 26.

Previously, the city only covered dependents to age 19 or to age 25 for full-time students.

When the city had an audit done in 2009 of those covered under its health insurance plans, it found a number of dependents over age 19 who no longer should have been covered by the city.

With the removal of those people from the health insurance rolls, the city was able to save $800,000.

But Ms. Johnson said the new federal mandate to cover dependents to age 26 not only eliminates the savings that had been achieved, but it doubles the number of dependents ages of 19 to 26 now covered under a city health insurance plan.

She said that requirement alone has increased the city’s health insurance costs by $2.4 million annually. In all, federal and state mandates equate to $3.5 million a year in additional health plan costs, she said.

Another contributing factor to the increased costs is that municipal health plan members have generated medical claims that are running higher than industry averages during the past 18 months.

Ms. Johnson said city medical claims costs are trending at about 105 percent of the premium funding.

In addition, she said, the city has a number of “high-cost claimants” who are estimated to generate similar or larger claims in the coming year, as determined by known trends, such as chronic conditions and pending transplants.

“We must include these trends in our fiscal year 2014 premium projections,” Ms. Johnson said.

Contact Nick Kotsopoulos at nkotsopoulos@telegram.com

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